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Now, let’s get to the non-rant part of this post.
Why exactly are batteries (this post only talks about lithium-ion batteries) so expensive? The answer for the major part is simply due to the scale of deployment.
While solar PV has reached 200 GW of installed capacity, batteries are still taking baby steps at best. The graph below compares the rate of deployment with falling costs for the two technologies (source).
Experience curve of PV vs. that of Li-ion batteries. Photo credit: BNEF
In spite of this, a product like the Tesla Powerwall, though expensive at its current cost for the U.S. (save probably Hawaii), would be welcomed with open arms in Germany and Australia. Check this Wikipedia page to figure out other probable countries. The former two are important, though, because of their solar installations.
As this excellent (though a little dated) presentation from Roland Berger explains, the main costs are associated with the high cost of raw materials and materials processing as well as the costs of the cell, packaging and manufacturing. Raw materials and processing alone account for around 40 percent of cell costs and have huge potential for cost reduction.
Quite interestingly, the presentation published back in 2011 expected Li-ion battery prices to fall to $250/kWh by 2020. An article on MIT Entrepreneur Review, during the same period, holds a similar viewpoint:
“With the right battery chemistry, it’s feasible for costs to go as low as $300/kWh for lithium iron phosphate or lithium manganese oxide cells. That’s in the best of scenarios.”
But if you have been paying attention, we are already there. These industrial-scale batteries will cost $250 per kWh of storage capacity—five years ahead of the schedule.
An article published in Nature backs up these claims (paywall). Björn Nykvist & Måns Nilsson (Stockholm Environment Institute) show that industry-wide cost estimates declined by approximately 14 percent annually between 2007 and 2014, from above $1,000 per kWh to around $410 per kWh. The cost of battery packs used by market-leading battery electric vehicle (EV) manufacturers is even lower, at $300 per kWh.
Winfried Hoffman at the consulting firm ASE agrees. In an interview with PV Magazine last year, he put it quite bluntly that battery storage costs will fall considerably faster that most experts are currently projecting. The interview post goes on to say:
“If the battery has 80 percent usable capacity and holds 5,000 cycles, the cost of stored electricity in this evaluation will fall from €0.20/kWh ($0.25) in 2012 to €0.05/kWh ($0.06) in 2030. Should the solar power generation costs fall to €0.05-€0.10/kWh, electricity costs that are more than competitive with the cost of household electricity will result.”
The cost of solar PV is expected to fall about 40 percent over the next two years. With battery costs plummeting similarly, the next round of solar rush is set to witness a wave of a lifetime. And countries like India are waiting impatiently.
How can you help? Don’t be myopic. Don’t push the future further away.
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